“Lessons Learned” is a series where we ask ecommerce business executives to share their experiences and advice. For this installment, we interviewed David Kravetz, the catalog and web team leader of Fairytale Brownies, an online brownie gift store based in Phoenix, Ariz.

Fairytale Brownies was launched in 1992 when Kravetz joined forces with childhood friend, Eileen Spitalny, to sell gourmet Belgian chocolate brownies online. Today, Fairytale Brownies’ online sales are primarily powered by printed catalogs mailed to approximately 1.8 million households annually. Fairytale Brownies expects to gross roughly $8 million in 2009, with around 60 percent of its revenue from online sales.

Kravetz offers the benefit of his experience in ecommerce below.

More About the Printed Catalog

David Kravetz

“The brownie gift catalog really drives a large portion of our business. Although we do most of our revenue through online sales, a lot of those customers find us through receiving our catalog, so I think there is still a big role for the printed catalog and direct mail pieces in the ecommerce business.

“We did a total of six mail drops this year, and we printed multiple versions of the catalog that are mostly cover change-outs, like the September drop had the first few pages in a Fall theme and Halloween gifts; and the next drop featured Thanksgiving; and the next drop featured Christmas. But the core of the product pages remains the same because it’s less expensive to change out just a few of the outer pages.

“A lot of the traditional mailing strategies still work very well for us, such as renting mailing lists and prospecting names. The more catalogs you mail, the more revenue you get, but it’s at a lower and lower response rate, so you have to be very careful to mail to targeted lists that are producing positive results, or you can over-mail and end up losing money on every piece you mail.”

Shopping Cart Software and Web Hosting

“Our cart is a combination of a customized cart and an off-the-shelf cart. We use a system called Ecometry Commerce Suite by Escalate Retail. We were originally with Mail Order Manager for many years but we had just outgrown them. We wanted to make a jump to a more integrated system, and so we upgraded to Ecometry about five years ago. They helped us build our web shopping-cart so that it would communicate directly with the back-end, and then we modified the front-end to customize it to our business.

“Ecometry runs everything except the accounting. It is fully integrated with our shipping, credit card processing, printing all the orders, maintaining the customer database, and all the inventory transactions.

“Our servers are hosted on Rackspace. We’ve stayed with them over the years because they are able to scale up and down very easily, so we can order additional servers in the months before the busy holiday season and turn them off in January.”

Credit Card Payments

“We use First Data as our gateway. We have a frame relay connection for all the credit card processing, and we are in the process of becoming PCI compliant by July 2010. The first thing we’re doing is taking an upgrade on the Ecometry system in February, so the system will be compliant as far as the encryption side of it; and then we will work on credit card security and auditing our internal processes so that we have that side of it as secure as the software side.”

Order Management

“About 60 percent of our orders happen in the last three weeks of December, and when the orders come in it is all pretty much automated through Ecometry. The brownies are frozen when they come out of the oven and the gifts are pre-assembled. During the off-season we process orders about twice a day, but during the holidays we are shipping from 3,000 to 15,000 packages a day so we are processing almost continuously.”

Employees

“Year-round we have about 30 employees. Around August we start ramping up for shipping, baking, customer service and data entry. At our peak, just after Thanksgiving, we get up to about 120 people.

“We really try to encourage empowerment. Everyone who works here is required to read Empowerment Takes More Than a Minute by Ken Blanchard, who also wrote The One-Minute Manager. One of the things that came out of that was our $100 empowerment policy that says any team member has the authority to spend up to $100 of the company’s money to make the customer happy.

“Also, we try to use terms like ‘team member’ and ‘team leader’ instead of ‘manager’ and ‘employee.'”

Listen

Listen to David Kravetz discuss the beginnings of Fairytale Brownies.

Search Engine Optimization

“Right now our blog is the primary driver for search engine optimization. We’ve been using a company called Compendium Blogware for the past two years. We do a lot of keyword-rich blogging, and we’ve had very good success. Search terms like ‘mail order brownies’ and ‘gourmet brownies’ will point to our blog, and that’s been very effective for us.

“We’ve also got a few traditional things going on, like in the footer of our home page you’ll find a lot of keywords in small gray print. We’ve also taken a lot of seminars on SEO, and there’s still more that we want to do, like we want to customize all our URLs to contain relevant keywords for every product detail page.”

Social Media

“We have about 1,400 Facebook fans and about 2,000 Twitter followers, and we usually post something every day. We also have about 20 videos on YouTube.”

Email

“This is something exciting we just started yesterday: We discovered through some comments that a large number of our customers who had opted out of emails were wondering why they never heard from us about specials. As part of spam compliance you’re allowed to contact your customers by email if it is for informational purposes only, and so we sent out a non-promotional email that said, ‘We’re just reminding you that you are currently unsubscribed from our promotional emails. If you choose to subscribe just click this button.’ If it was clicked, we sent an offer immediately. Out of the first 18,000 emails sent, we had more than 800 opt in and we got around 50 orders the first day.”

Pay-Per-Click Advertising

“We’ve scaled back on our PPC advertising because we’ve found there is a very limited number of keywords working for us there. A while back, we hired two different pay-per-click consultants, and they overbought PPC to an extreme. They tried a ‘shotgun’ approach and we were buying thousands of minor keywords that were all over the map. We were losing money every month and it was tens of thousands of dollars down the drain. Finally, we put an end to it, brought the whole thing in-house and now we only buy, maybe, 50 keywords. Most of them have the name of the company, or the misspelling of the name, in them.”

Shipping

“We just changed our shipping prices to a flat rate of $6.95 for any gift, any quantity, and our customers really like that. Also, we have address validation software that checks addresses before the gifts go out, because customers are not always sure of the address they are sending a gift to.

“We use UPS for most packages, and we use U.S. Postal Service for P.O. Boxes and military addresses. A lot of our competitors won’t send to P.O. boxes, but we’ve never had a problem with it. Also, we have been offering free shipping to APO/FPO military addresses for a couple years now and we get really good feedback on that. The Post Office ships the brownies to Iraq and Afghanistan in three or four days sometimes, and we are always amazed.”

Expense Control

“Negotiate. We’ve learned time and time again if you don’t ask you don’t get the best price. We had to go back to all our vendors this past year and they were all able to work with us and give us better pricing. We’ve learned there is a lot of money you could be leaving on the table if you don’t regularly negotiate the best deal.”

Accounting Software

“All the sales happen in Ecometry and then we just transfer the sales into an accounting package that is a very old, entry level system. (We were going to upgrade this past year but we decided to postpone it.) It is basically an equivalent of QuickBooks called MYOB for Mind Your Own Business. We also pay bills out of it. It’s pretty basic but it works for us.”

Customer Service

“For seven years in a row we have been a gold honoree in customer service from bizrate [online shopping comparison site], and I attribute a lot of that to our empowerment policy. We do whatever it takes, and we believe in first-call resolution. Our guarantee truly is 100 percent satisfaction. We’ve been known to refund very large orders for something as small as misspelling a name on a gift message.”

Biggest Mistake

“A couple years ago a consultant we were working with had us over-circulate our catalog. He had us renting lists that had nothing to do with food and we just trusted his judgment. If we had mailed 200,000 fewer catalogs, we would have made $200,000 more profit. We learned to be very specific with the lists we rent, how often we mail, and how many years we continue to mail to a [non-producing customer] before we let the name go.”

Biggest Success

“Two years ago we did a major upgrade to the website, in great part to address customer complaints about the difficulty of ordering multiple shipments. We built a system that could handle the complexity of multiple brownie gifts going to multiple different addresses, and by [eliminating a major checkout problem] we improved customer satisfaction and increased sales.”

Best Advice

“I always caution people to temper their expectations when starting an ecommerce business. A lot of people think they can just launch a site and people will come flocking to it, but you need to go out and get the people, either through social media or a print catalog or a direct mail piece or pay-per-click. You’ve got to be constantly working to get people to come to your site.”

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Comment ( 1 )

I use to live right by Fairytale Brownie’s old location in Chandler. Today, as I sit in my office in Tucson, AZ, I stumbled upon this article. I’m amazed that here I’m reading an article on Fairytale Brownies (which by the way are phenominal) and the success they’ve achieved! I saw just before I moved the new corporate center location in Phoenix that FTB moved to and thought, wow, they’re really moving up. Now I see they’ve really gotten something right! Way to go FTB!